The Government of Papua New Guinea Imposes a Historic Fine on a Logging Company for Tax Evasion
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July 4, 2023; 12:00AM PST
The Internal Revenue Commission (IRC) of Papua New Guinea has imposed a substantial K140 million [US$ 40 million] tax assessment against a prominent logging operator for illicit tax evasion, specifically through transfer pricing.
IRC’s action follows the audit of 20 logging companies launched after Oakland Institute’s two investigations exposed massive tax evasion by these firms.
Over the last decade, Papua New Guinea has become the largest exporter of tropical timber.
Papua New Guinea has set a standard for the rest of the world by showing that governments in the Global South can stand up to the powerful corporate interests responsible for tax evasion, environmental devastation, deforestation, and the climate crisis.
Oakland, CA — On June 26, 2023, the Internal Revenue Commission (IRC) of Papua New Guinea announced the imposition of a substantial K140 million [US$ 40 million] tax assessment against a prominent logging operator for engaging in illicit tax evasion. The company, whose name has been withheld, was found guilty of transfer pricing − manipulation of prices at which goods or services are transferred between related parties or companies within a multinational group — which artificially reduces taxable profits.
IRC’s action is the first concrete result of its audit of 20 companies that was announced in May 2021. These moves by the government of Papua New Guinea followed the 2019 increase in the log export tax, which impacted activities of the logging companies.
"The announcement of the K140 million levy for tax evasion is a direct result of the ground-breaking investigative research and advocacy done by Oakland Institute, and a powerful example of effective partnership between an international organization and local civil society groups on issues of corporate crime,” said Eddie Tanago, Campaign Manager at Act Now!, a PNG-based NGO and a key advocate of government action against illegal logging in the country.
The announcement comes after two reports from the Oakland Institute, The Great Timber Heist and The Great Timber Heist Continued, exposed massive tax evasion by logging companies responsible for plundering the third largest rainforest in the world. The reports revealed how these firms evaded corporate income tax for decades by continually claiming losses every year, despite exports of millions of cubic meters of tropical timber. The investigation found, for instance, that all together the 16 subsidiaries of the largest logger in the country, the Malaysian Group Rimbunan Hijau, declared losses of US$277 million from their operations between 2000 and 2016.
“The Oakland Institute congratulates the IRC and the government of Papua New Guinea for effectively tackling the fraudulent activities of the logging companies. Their actions are critical to stop the environmental devastation and to put an end to the loss of livelihoods and widespread human rights abuses by the companies involved,” said Frédéric Mousseau, Policy Director of the Institute. “Papua New Guinea has set a standard for the rest of the world by showing that governments in the Global South can stand up to the powerful corporate interests responsible for tax evasion, environmental devastation, deforestation, and the climate crisis.”